Owners win rent control suit in appeal vs. DHCR

Real Estate Weekly, May 21, 1997 by Lois Weiss

The Community Housing Improvement Program (CHIP) has been trying to get courts to recognize the improper use of the wrong numbers for years, but in one instance the case was dismissed on technical grounds. They have now obtained justice in a case based on the 1996 calculations.

Jeffrey R. Metz, of Borah Goldstein Altschuler & Schwartz, who along with Robert Goldstein represented CHIP, said "The agency fairly defiantly was ignoring the statute. Certainly I found that kind of important, and the appellate division found that also. The court basically applied the law. DHCR didn't even hide the fact that they did not follow the statute," Metz added.

In CHIP vs. DHCR, the Albany appellate division justices agreed that DHCR purposefully miscalculated the proper rent increase as 3 percent when it should have been 32.5 percent because they specifically ignored a statutorily mandated calculation of the Maximum Base Rent increase factor.

Since other laws limit the annual increase for rent controlled tenants to 7.5 percent, the overage from the 32.5 percent would be applied in later years, effectively increasing rents 7.5 percent for the next few years for these tenants.

DHCR officials have not yet decided if they will seek permission to appeal the ruling from the state's highest court, the Court of Appeals.

According to the 1996 Housing and Vacancy survey, there are 70,572 rent controlled apartments, constituting 3.5 percent of New York City's rental stock. Statistics interpreted by the New York University Center for Real Estate and Urban Policy found that since 1993, the number of rent controlled units has declined by 31,226 units, or 30.7 percent. These units fall under rent stabilization laws upon vacancy.

When looking at 1995 incomes, there were 3,136 rent controlled households earning over $100,000 per year. Of the 339 households with incomes over $175,000, none contained an elderly tenant.

Dan Margulies, executive director of CHIP, said if they ultimately win, the agency would have to issue new MBR orders to anyone who was granted an MBR increase for the 96/97 year. He believes it totals more than 10,000 units.

The increase was limited to 3 percent in 1996 and nothing in 1997, so if CHIP ultimately wins, it will mean the balance of the 7.5 percent can be collected for 1996 and the full 7.5 percent for 1997.

"It does not mean a 32 percent increase in rents as DHCR argued in court, and the Appellate Division saw through that and said we are talking about the 7.5 percent," said Margulies, who noted that it's always nice to win, especially nice after fighting a battle for seven years.

"It's a pleasure to have a panel of judges agree it's a no-brainer," he said. "But unfortunately, as I've learned, just because something is clear in the law doesn't mean another court will agree. I'm not yet counting my chickens."